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GBUS 3030

Global Business Case Studies


Team 4
BECK TAXI
September 25th 2012
Christopher Chia, Sherwin Wong, Xiang Hui Cheow

T.A.X.I. scheme will generate $670,000


profit in 2 years.
Beck Taxi loses
$27,000
revenue per
summer

Summer
Radio
Dispatch Fee
reductions

Opportunity
to increase
profit by
$178,000 in 1
year

Beck Taxi, Taxi made easy

T.A.X.I. scheme will generate


$669.000 profit in 2 years
2

Lean season Reduces Beck Taxis Monthly


Revenue by $10,000
Beck Taxis Monthly Revenue in 2008

Lean Season for Taxi Industry from June to August

In $, 000s

Average Loss of $
2,755
10,000 in Monthly
Revenue in Summer
2,740
Shift Taxi Drivers Lose Incentive to Drive in Summer
2,725
due to Lower Earnings

2,710
2,695
2,680
1.5% Beck Taxis Vehicles Become Idle in the Summer

2,665
2,650
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Loss of Plate Lease and Radio Fees Received by Beck


Taxi

Source: Company Data

Beck Taxi must take advantage of the lean


season and use it as an opportunity to
boost future revenue
Current Situation

Lean Season Recurs Every Year

Cyclical Fluctuation in Demand for


Taxi Services Caused by External,

Key Questions to Address:

1. Can Beck Taxi Turn Lean

Uncontrollable Factors

Season into an Opportunity to

Beck Taxi Charges $450 Monthly

Boost Future Revenue through

Fixed Fee ($400 of which are Radio

Changing its Price in Summer?

Fees)

Beck Taxi Suffers $30,000 of Loss


in Revenue Every Summer

2. What Other Measures can

Beck Taxi Leads Saturated Market

Beck Taxi Take to Further

with 30% Share

Increase its Revenue?


4

Reducing the fixed fee for the summer will


increase profits by $178,000 in 1 year
Goal:
To Increase Revenue for Beck Taxi without Neglecting the Interests of
Taxi Drivers, its Direct Customer and Major Stakeholder
4 Pricing Strategies:
1. Maintain Status Quo
2. Increase Fixed Fee
3. Reduce Fixed Fee and Charge for Each Dispatch
4. Reduce Fixed Fee only for the Summer and Restore the Price in
September
Criteria:
A. Impact on Beck Taxis Revenue and Gross Profit
B. Impact on Drivers Earnings and Loyalty to Beck Taxi
Recommendation:
Reduce Fixed Fee only for the Summer Increase Profit by

$178,000 (2.3%) in 1 Year


5

Before digging into the financials, we have


made a few key assumptions
Revenue:
Plate Lease Income from Shift Drivers
Plate Lease Income from Lease Drivers
Fixed Fee
Expenses:
Plate Lease Paid to Independent Owners
Plate Lease Paid to Larger Fleet of Vehicles
Maintenance Costs for Shift Drivers Vehicles
Salary Expenses
GST + Driver Assault Fund
Gross Profit = Revenue - Expenses
6

Increasing fixed fee will increase gross


profit by $81,000 in 1 Year
Projected Results of Increasing the Fixed Fee
Increase Fixed Fee from $450 to $490 (10% of Fixed Radio Fee)
6% Decrease in Drivers due to Higher Price

In $, 000s

9,500
9,000
8,500
8,000
7,500
7,000
6,5007,82

1,010

+1,0
91

+8

7,90
1
9

By decreasing the fixed fee and charge per


dispatch, Gross Profit will decrease by
$92,000
Year
Projected
Resultsin
of1Reducing
the Fixed Fee and
Charging Per Dispatch

Reduce Fixed Fee from $450 to $370 (20% of Fixed Radio Fee)
Charge $1 per Dispatch (Assume 4 Dispatches per Driver per Day)
3% increase in drivers
10% Increase in Salary Expenses and $1 Extra Cost per Taxi per Day

In $, 000s

9,500
9,000
8,500
8,000
7,500
7,000
6,500

7,8
28

+1,7
52

1,84
4

7,7
36

92

Reducing fixed fee in summer will Increase


gross profit by $178,000 in 1 Year

Projected Results of Reducing the Fixed Fee During


Summer
Reduce Fixed Fee From $450 to $410 (10% of Fixed Radio Fee)
3% Increase in Drivers due to Price Cut

In $, 000s

9,500
9,000
8,500
8,000
7,500
7,000
6,500
7,8

28

+84
3

-665

8,0 +17
8
06

Reducing fixed fee in the summer generates


the most annual gross profit
Gross Profit Comparison for the Four Options

In $, 000s
8,050
8,000
7,950
7,900
7,850
7,800
7,750
7,700
7,650
7,600

7,9
+81
09

+1.0%

7,8
28

7,7
36
-92

8,0
06

+178
+2.3
%

-1.2%

10

Reducing the fixed fee to $410 in summer


leads to smallest reduction in drivers
earnings
Daily Earnings of A Lease Driver under Various Pricing Strategies in Summer

Daily Earnings of A Shift Driver under Various Pricing Strategies in Summer

In $)
100

90
80
70
60

25.7
%

27.1
%

24.7
%

24
.3
%

(In $)
200
160
140
120

50

100

40

80

30

60

20

40

10

20

Current Daily Earnings Daily Earnings in Summer

180

13.4
%

14.1
%

12.8
%

12.
6%

Current Daily Earnings Daily Earnings in Summer

11

Reduce Fixed Fee in Summer Benefits


Various Stakeholders -Beck Taxi, Taxi
Drivers and Vehicle Owners
Reduction of Fixed Fees from $450 to $410 by Beck Taxi in
Summer

Reduction of Fixed Costs to Taxi Drivers by $40

Higher Earnings Prevent Existing


Shift Drivers Customers from Not
Driving

Lower Fixed Radio Fees Attract


New Taxi Drivers and Expand
Beck Taxis Customer Base by 3%

Maintenance Plate Lease and


Radio Fees Income for Vehicle
Owners and Beck Taxi
respectively

Increase of Beck Taxis Gross


Profit by 2.3% in 1 Year

Reduce Fixed Fee Only in Summer:


Best Short Term Pricing Strategy to Boost Beck Taxis Revenue

and Benefit Taxi Industry


12

Link Between Short Term and Long Term


Solution Lies within Relationships between
Stakeholders

More
Taxi
Drivers

More
Fleet
Owners

More
Custom
ers

13

T.A.X.I Solution Aims to Reinforce Linkage


between Stakeholders

T:

Taper Summer Fixed Fee

A:

Advertising

X:

X-hibit Qualities

I:

Incentive Schemes

14

t of
T.A.X.I
Reducti
on of
Summer
Radio
Dispatc
h Fees
-Start of
New
Training
and
Incentiv
e
Scheme
s

The timeline indicates the schedule in which


different phases of T.A.X.I. will be be
conducted

18092012 Team 1

Sep 1,
2009:
-Restore
of Radio
Dispatc
h Fees

Oct 1,
2009:
-Start of
Advertis
ement
Campai
gn

Mar 1,
2010:
-End of
Advertis
ement
Campai
gn

Jun 1,
2010:
Reducti
on of
Summer
Radio
Dispatc
h Fees

Sep 1,
2010:
-Restore
of Radio
Dispatc
h Fees

15

Tapering summer dispatch fees generates


an increment of 5.4% gross profit in 2 years

Projected Results of Tapering Summer Fixed Fee in 2


Years:
Reduce Fixed Fee from $450 to $410 (10% of Fixed Radio Fee)
3% and 2% Increase in Customers in 1st and 2nd Year Respectively
Gross Profit

In $, 000s
8,300
8,200
8,100
8,000
7,900

8,247

5.4%
Increase in8,006
Gross Profit
in 2 Years
7,828

7,800
7,700
7,600

16

Advertising increases brand equity and


makes Beck Taxi the passengers brand of
choice

Bra
nd
Equ
ity

Aware
ness

Custo
mers

Beck Taxi, Taxi made


easy
17

The advertisement campaign will increase


revenue by 330,000 CAD in 6 months
Strategy:
Billboards on relatively rural parts of Vancouver
Television Advertisement
Projected Impacts:
Increase in Taxi consumption by 5.5%
Increase in amount of Taxi drivers by 2%
Increase in Revenue by $330,000
Budget:
Billboards $12,000
Television Advertisement $88,000

18

By exhibiting our qualities, we aim to


achieve high levels of passenger retention
rates

Training
Schemes

Polite
Drivers
Arriv
al
Spee

19

By increasing incentives for fleet owners,


we can generate an additional $25,000 in
revenue

Increase discount to fleet


owners from 10% to 12.5%

resulting increase in
fleet-owners vehicles with
Beck by 90 (10% increase)
in 2 years

the increase is
equivalent to 0.6% of total
vehicles managed by Beck
Taxi
Increase in revenue :
$25,313 (7% increase in
revenue from fleet owners)

20

Our Recommendation Increases Beck Taxis


Profit by $669,000 in 2 Years

In $, 000s
9,500
9,000

+5.4%

+2.9%

8,500
8,000

7,828

+8.5%
8,497

+0.3%

7,500
7,000

21

Question & Answer Section

Q&
A
18092012 Team 1

22

Appendix: Beck Taxis Monthly Revenue in


2008
Beck Taxis Monthly Revenue in 2008
In $, 000s

2,755
2,740

Average Loss of $
10,000 in Monthly
Revenue in Summer

2,725
2,710
2,695
2,680
2,665
2,650
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Source: Company Data

23

Appendix: Daily Earnings of Taxi Drivers in


Normal Times

24

Appendix: Summer Daily Earnings of Taxi


Drivers if Status Quo
Summer DailyEarningsof Taxi Driversif StatusQuo
Revenue in $

Notes

Shift Driver

LongTerm Lease Driver

Earning in Shift

150.0

150.0

Tip

15.0

15.0

Others

0.0

65.0

165.0

230.0

Notes

Shift Driver

LongTerm Lease Driver

Plate Lease

65.0

38.3

Gas Charge

8.0

8.0

Traffic Tickets

4.0

4.0

Repair and Maintenance

0.0

3.5

Driver License Charge

2.3

2.3

Average Radio Fees per Day

15.0

15.0

94.3

71.1

70.7
-25.7%

158.9
-13.4%

Total Revenue
Expensesin $

Total Expenses
Daily Earnings in $
%Decrease in Earnings
Notes:

1
2
3
4
5
6
7
8
9

12 fare and $12.5 average fare


10%average
Assume that he is giving taxi during night shift and earning
$1150 per month so divided by 30 days
Assume 20%decrease during summer
Assume 20%decrease during summer
Repair and maintenance
Driver License charge $836 Annually
$450 Per Month for Radio Fees

25

Appendix: Summer Daily Earnings of Taxi


Drivers if Increase Fixed Fee

26

Appendix: Summer Daily Earnings of Taxi


Drivers if Decrease Fixed Fee & Charge per
Dispatch

27

Appendix: Summer Daily Earnings of Taxi


Drivers if Decrease Summer Fixed Fee

28

Appendix: Status Quo 3 Months

Average Monthly Income Statement of Beck (In


Taxi
$,000s)
Projected results in 3 months of Summer: -1.5% in customers (22 vehicles
become idle)

-1.5%
Revenu
e

Unit (B)

Plate Lease Income from Shift Drivers

Growth

Unit (A)

Days>Month

Rate

461

-1.5%

454

65

Plate Lease Income from Lease Drivers

1015

-1.5%

1,000

1150

Radio Dispatch and Other Fees

1476

-1.5%

1,454

450

3
1 Month Months

30 885,466
1,149,74
1
654,237

885

2656

1150

3449

654

1963

2689

8068

Total Revenue

2,689,44
4

Daily Revenue

Expens
es
Plate Lease to Independent Owners
18092012 Team 1

576

-1.5%

567

1150

652,464

652

1957
29

Appendix: Status Quo 9 Months

Average Monthly Income Statement of Beck


Taxi
(In $,000s)
Projected results in 9 months after Summer: Decrease in customers back to
normal

Revenu
e

Unit (B) Growth

Plate Lease Income from Shift Drivers

Unit (A)

Days>Month

Rate

461

0.0%

461

65

Plate Lease Income from Lease Drivers

1015

0.0%

1,015

1150

Radio Dispatch and Other Fees

1476

0.0%

1,476

450

9
1 Month Months

30 898,950
1,167,25
0
664,200

899

8091

1167

10505

664

5978

2730

24574

Total Revenue

2,730,40
0

Daily Revenue

Expens
es
Plate Lease to Independent Owners

18092012 Team 1

576

0.0%

576

1150

662,400

662

5962

30

Appendix: Status Quo 12 Months

Average Monthly Income Statement of Beck


Taxi

(In $,000s)

Revenu
e
Plate Lease Income from Shift Drivers
Plate Lease Income from Lease Drivers
Radio Dispatch and Other Fees

3
9
12
Months Months Months
2656
8091
10747
3449 10505
13954
1963
5978
7941

Total Revenue
Daily Revenue

18092012 Team 1

8068

24574

32642

Expens
es

Plate Lease to Independent Owners


Plate Lease to Larger Fleet of Vehicles from
Agency
Maintenance costs for Vehicles Driven by Shift
Drivers
Salary of Full-time Employees
Other Expenses

1957

5962

7919

3058

9315

12373

136
900
92

415
2700
279

551
3600
371

31

Appendix: Increase Fixed Fee 1 Month

Average Monthly Income Statement of Beck Taxi


Beck Taxi (If Increase Fixed Radio Fee from $400
to $420)
Projected Results: No loss of customers during
first month

Revenu
e

(In $,000s)

Unit (B) Growth

Plate Lease Income from Shift Drivers

Unit (A)

Days>Month

Rate

461

0%

461

65

Plate Lease Income from Lease Drivers

1015

0%

1,015

1150

Radio Dispatch and Other Fees

1476

0%

1,476

490

1 Month

30 898,950

899

1,167,25
0

1167

723,240

723

Total Revenue

2,789,44
0

Daily Revenue

Expens
es
Plate Lease to Independent Owners

18092012 Team 1

576

0%

576

1150

662,400

2789

662

32

Appendix: Increase Fixed Fee 2 Months

Average Monthly Income Statement of Beck Taxi (In $,000s)


Beck Taxi (If Increase Fixed Radio Fee from $400
to $420)
Projected Results: Loss of 5% of customers (measured in terms of plate owners) --> 74
vehicles gone
-6.0%
Revenu
e

Unit (B) Growth

Plate Lease Income from Shift Drivers

461

Unit (A)

-6.0%

Days>Month

Rate

433

65

1
2
Month Months

30 845,013

Plate Lease Income from Lease Drivers

1015

-6.0%

954

1150

Radio Dispatch and Other Fees

1476

-6.0%

1,387

490

1,097,21
5
679,846

845

1690

1097

2194

680

1360

2622

5244

Total Revenue

2,622,07
4

Daily Revenue

Expens
es
Plate Lease to Independent Owners
Plate
Lease
to Larger Fleet of Vehicles from
18092012
Team
1

576

-6.0%

541

1150

622,656

623

1245
33

Appendix: Increase Fixed Fee 9 Months

Average Monthly Income Statement of Beck Taxi (In $,000s)


Beck Taxi (If Increase Fixed Radio Fee from $400
to $440)
Projected Results: Loss of 5% of customers (measured in terms of plate owners) --> 74
vehicles gone
-6.0%
Revenu
e

Unit (B) Growth

Plate Lease Income from Shift Drivers

461

Unit (A)

-6.0%

Days>Month

Rate

433

65

1
9
Month Months

30 845,013

Plate Lease Income from Lease Drivers

1015

-6.0%

954

1150

Radio Dispatch and Other Fees

1476

-6.0%

1,387

490

1,097,21
5
679,846

845

7605

1097

9875

680

6119

2622

23599

Total Revenue

2,622,07
4

Daily Revenue

Expens
es
Plate Lease to Independent Owners
Plate
Lease
to Larger Fleet of Vehicles from
18092012
Team
1

576

-6.0%

541

1150

622,656

623

5604
34

Appendix: Increase Fixed Fee 12 Months

Average Monthly Income Statement of Beck Taxi


Beck Taxi (If Increase Fixed Radio Fee from $400
to $440)

(In $,000s)

Revenu
e
Plate Lease Income from Shift Drivers
Plate Lease Income from Lease Drivers
Radio Dispatch and Other Fees

2
9
12
Difference from
1 Month Months Months Months
SQ
899
1690
7605
10194
-553
1167
2194
9875
13237
-718
723
1360
6119
8202
261

Total Revenue
Daily Revenue

18092012 Team 1

Expens
es
Plate Lease to Independent Owners
Plate Lease to Larger Fleet of Vehicles from
Agency
Maintenance costs for Vehicles Driven by Shift
Drivers
Salary of Full-time Employees
Other Expenses

2789

5244

23599

31632

-1010

662

1245

5604

7512

-407

1035

1946

8756

11737

-637

46
300
31

87
600
58

390
2700
262

523
3600
351

-28
0
-19

35

Appendix: Reduce Fixed Fee + Pay Per Dispatch


(1 Month)

Average Monthly Income Statement of Beck


Taxi
(In $,000s)
Beck Taxi (If Decrease Fixed Radio Fee from $400 to $300, and charging $1 Per
Dispatch)
Projected Results: No increase in customers during the first
month

Revenu
e

Unit (B) Growth

Plate Lease Income from Shift Drivers

461

Unit (A)

0%

Days>Month

Rate

461

65

1 Month

30 898,950

Plate Lease Income from Lease Drivers

1015

0%

1,015

1150

Fixed Radio Dispatch Fee

1476

0%

1,476

370

Radio Dispatch Fee Per Dispatch

1476

0%

1,476

899

1,167,25
0

1,167

546,120

546

30 177,120

177

Total Revenue

2,789,44
0

Daily Revenue

Expens
es
18092012 Team
1
Plate

Lease to Independent Owners

576

0%

576

1150

662,400

2,789

662

36

Appendix: Reduce Fixed Fee + Pay Per Dispatch


(2 Months)

Average Monthly Income Statement of Beck


Taxi
(In $,000s)
Beck Taxi (If Decrease Fixed Radio Fee from $400 to $300, and charging $1
Per Dispatch)
Projected Results: Increase of 3% customers
3%
Revenu
e

Unit (B) Growth

Plate Lease Income from Shift Drivers

Unit (A)

Days>Month

Rate

461

3%

475

65

Plate Lease Income from Lease Drivers

1015

3%

1,045

1150

Fixed Radio Dispatch Fee

1476

3%

1,520

370

Radio Dispatch Fee Per Dispatch

1476

3%

1,520

2
1 Month Months

30 925,919

926

1,852

1,202

2,405

562,504

563

1,125

30 182,434

182

365

2,873

5,746

1,202,26
8

Total Revenue

2,873,12
3

Daily Revenue

Expens
es
18092012 Team 1

Plate Lease to Independent Owners

576

3%

593

1150

682,272

682

1,365

37

Appendix: Reduce Fixed Fee + Pay Per Dispatch


(9 Months)

Average Monthly Income Statement of Beck Taxi (In $,000s)


Beck Taxi (If Decrease Fixed Radio Fee from $400 to $300, and charging $1 Per
Dispatch)
Projected Results: Increase of 3% customers
3%
Revenu
e

Unit (B) Growth

Plate Lease Income from Shift Drivers

Unit (A)

Days>Month

Rate

461

3%

475

65

Plate Lease Income from Lease Drivers

1015

3%

1,045

1150

Fixed Radio Dispatch Fee

1476

3%

1,520

370

Radio Dispatch Fee Per Dispatch

1476

3%

1,520

1
9
Month Months

30 925,919

926

1,202,26
8

8,333

1,202 10,820

562,504

563

5,063

30 182,434

182

1,642

Total Revenue

2,873,12
3

Daily Revenue

Expens
es
Plate Lease to Independent Owners

18092012 Team 1

576

3%

593

1150

682,272

2,873 25,858

682

6,140

38

Appendix: Reduce Fixed Fee + Pay Per Dispatch


(12 Months)

Average Monthly Income Statement of Beck Taxi (In $,000s)


Beck Taxi (If Decrease Fixed Radio Fee from $400 to $300, and charging $1
Per Dispatch)

Revenu
e
Plate Lease Income from Shift Drivers
Plate Lease Income from Lease Drivers
Fixed Radio Dispatch Fee
Radio Dispatch Fee Per Dispatch

2
9
12
Difference from
1 Month Months Months Months
SQ
899 1,852
8,333 11,084
337
1,167 2,405 10,820 14,392
438
546 1,125
5,063
6,734
-1,207
177
365
1,642
2,184
2,184

Total Revenue
Daily Revenue

Expens
es
Plate Lease to Independent Owners
Plate Lease to Larger Fleet of Vehicles from
Agency
Maintenance costs for Vehicles Driven by Shift
Drivers
Salary of Full-time Employees
18092012 Team 1

2,789

5,746 25,858

34,394

1,752

662

1,365

6,140

8,167

248

1,035

2,132

9,594

12,762

388

46
330

95
660

427
2,970

568
3,960

17
360
39

Appendix: Reduced Fixed Fee During Summer (1


Month)

Average Monthly Income Statement of Beck


Taxi
(In $,000s)
Beck Taxi (During Summer Price Cut jul and aug, If Decrease
Summer Fee)
Projected Results: No increase in customers during the first
month

Revenu
e

Unit (B) Growth

Plate Lease Income from Shift Drivers

Unit (A)

Days>Month

Rate

461

0%

461

65

Plate Lease Income from Lease Drivers

1015

0%

1,015

1150

Radio Dispatch and Other Fees

1476

0%

1,476

410

1 Month

30 898,950

899

1,167,25
0

1167

605,160

605

Total Revenue

2,671,36
0

Daily Revenue

Expens
es
Plate Lease to Independent Owners

18092012 Team 1

576

0%

576

1150

662,400

2671

662

40

Appendix: Reduced Fixed Fee During Summer (2


Months)

Average Monthly Income Statement of Beck Taxi (In $,000s)


Beck Taxi (During Summer Price Cut jul and aug, If Decrease
Summer Fee)
Projected Results: Increase of 2% customers --> 30 new
vehicles
3%
Revenu
e

Unit (B) Growth

Plate Lease Income from Shift Drivers

Unit (A)

Days>Month

Rate

461

3%

475

65

Plate Lease Income from Lease Drivers

1015

3%

1,045

1150

Radio Dispatch and Other Fees

1476

3%

1,520

410

1
2
Month Months

30 925,919
1,202,26
8
623,315

926

1852

1202

2405

623

1247

2752

5503

Total Revenue

2,751,50
1

Daily Revenue

Expens
es
Plate Lease to Independent Owners
18092012 Team 1

576

3%

593

1150

682,272

682

1365
41

Appendix: Reduced Fixed Fee During Summer (9


Months)

Average Monthly Income Statement of Beck Taxi (In $,000s)


Beck Taxi (After restoring price, If Decrease
Summer Fee)
Projected Results: Increase of 2% customers --> 30 new
vehicles
3%
Revenu
e

Unit (B) Growth

Plate Lease Income from Shift Drivers

461

Unit (A)

3%

Days>Month

Rate

475

65

1
9
Months Months

30 925,919

Plate Lease Income from Lease Drivers

1015

3%

1,045

1150

Radio Dispatch and Other Fees

1476

3%

1,520

450

1,202,26
8
684,126

926

8333

1202

10820

684

6157

2812

25311

Total Revenue

2,812,31
2

Daily Revenue

Expens
es
Plate Lease to Independent Owners
18092012 Team 1

576

3%

593

1150

682,272

682

6140
42

Appendix: Reduced Fixed Fee During Summer


(12 Months)

Average Monthly Income Statement of Beck Taxi


Beck Taxi (After restoring price, If Decrease
Summer Fee)

(In $,000s)

Revenu
e
Plate Lease Income from Shift Drivers
Plate Lease Income from Lease Drivers
Radio Dispatch and Other Fees

1
2
9
12
Difference from
Months Months Months Months
SQ
899
1852
8333
11084
337
1167
2405 10820
14392
438
605
1247
6157
8009
68

Total Revenue
Daily Revenue

18092012 Team 1

Expens
es
Plate Lease to Independent Owners
Plate Lease to Larger Fleet of Vehicles from
Agency
Maintenance costs for Vehicles Driven by Shift
Drivers
Salary of Full-time Employees
Other Expenses

2671

5503

25311

33485

843

662

1365

6140

8167

248

1035

2132

9594

12762

388

46
300
31

95
600
64

427
2700
287

568
3600
382

17
0
12

43

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